What is an industry super fund?

Though originally started for members of specific industries, industry super funds have since opened their doors to the public, becoming a favourite option for many Aussies. 

Their member-owned, not-for-profit status can result in lower fees and potentially higher returns for members, offering a distinct alternative to for-profit retail funds. 

Let's see what sets them apart!

Industry funds are member-owned not-for-profit super funds that were originally established by unions for workers in specific industries or trades. Because they don’t use a profit model, any surplus is invested back into the fund for the benefit of the members - often resulting in lower fees and enhanced services.  

Prior to 2005, membership in an industry super fund was restricted to workers within the specific industry associated with the fund. For example, healthcare workers would typically have their own dedicated healthcare industry fund. The same applied for construction workers, hospitality workers, and so on.

Besides being a place where members of a particular industry could grow their retirement savings, another major benefit was that these funds could offer services designed for these workers, like specific insurance products or financial advice. 

Industry super funds have since gone through a bit of a makeover, and there are now dozens of industry funds you can join, regardless of your industry. Do you like the returns your lawyer cousin is getting from his legal industry fund? Well you can probably now join it.While still member-owned, with not-for-profit status, and still largely associated with a particular industry, many of them have opened their doors to the outside public. 

In terms of investment options and strategies, they operate very similarly to other super funds. They offer a variety of investment choices and use comparable strategies to grow members' retirement savings. 

However, the key differences are that their boards are typically made up of employer and employee representatives, and any surplus is reinvested back into the fund to benefit members, rather than being distributed to shareholders. 

And while they’re now open to the public, they continue to offer services tailored to their original sectors. For example, a construction industry fund might offer insurance with a “dangerous occupations” exemption.

Here is just a partial list of prominent industry super funds and the industries they were originally associated with. However, all of the funds listed below are now open to anyone wishing to join. It's also important to note that "industry" refers to the workers these funds initially served, not necessarily the sectors they invest in.

• AustralianSuper. Formed from the merger of several industry funds, it was broadly associated with multiple industries including manufacturing and construction.
• Cbus. Construction and building industries.
• HESTA. Healthcare and community services.
• Hostplus. Hospitality, tourism, recreation, and sport industries.
• SpiritSuper. Formed from the merger of Tasplan and MTAA Super, originally associated with the motor trades and the broader Tasmanian workforce.
• CareSuper. Professional, managerial, administrative and service sectors.
• TWUSuper. Transport and logistics industry.
• FIRST Super. Timber, pulp, and paper industries, as well as furniture and joinery.
• Legalsuper. Legal profession, including law firms and their employees.

Now that most industry funds are open to the public, and offer similar investment options and services as retail funds, you may be asking yourself what’s the difference?

The major difference is that industry funds are not-for-profit, usually offering lower fees and using any extra money to improve member benefits and services. Retail funds, on the other hand, are for-profit, often providing more investment options and extensive services. Their fees can be higher since profits are shared with shareholders and reinvested to enhance what they offer.

Let’s look at some pros and cons of each. These are general in nature and may not apply to every single fund in its respective category.

According to data from SuperRatings, industry funds consistently rank in, and even dominate, the top 10 performing funds for investment performance, based on returns over the long term. One reason for this is that the lower fees aren’t eating into your returns.

So while industry super funds may offer fewer investment options and financial services compared to retail funds, they remain an attractive option, especially for those seeking a straightforward, cost-effective super fund that doesn’t skimp on performance. 

If you like the sound of an industry super fund, it pays to compare options before making the switch, Here’s what to keep in mind:

• Identify your priorities. Decide what matters most to you—low fees, high returns, ethical investments, or specific member perks. This helps narrow your options quickly.

• Check member services. Look into the unique services each fund offers. Some provide tailored financial advice, educational resources, or industry-specific insurance that can be really useful.

• Review performance. Compare how the funds have performed over 1, 5, and 10 years. Although past performance is not a reliable indicator of future performance, this gives you a snapshot of their reliability and growth potential.

• Examine industry benefits. Some funds offer perks tailored to specific industries. If you work in one of these sectors, these benefits can be a big plus.

Joining a retail super fund is usually pretty straightforward. While it might differ from fund to fund, these are the general steps:

1. Research and choose a fund. Based on your comparison, select an industry super fund you’re happy with.
2. Application process. Visit the fund's website or contact them to get your application underway. This usually involves filling out an online form or a paper application.
3. Provide identification. To meet legal requirements, you’ll need to provide identification along with personal details like your date of birth, contact info, full residential address and tax file number (TFN).
4. Nominate beneficiaries. Determine who will receive your super if you pass away. You’ll usually do this during the application process.
5. Roll over existing super. If you have super in another fund, you can choose to consolidate it into your new industry fund, although this is optional since you’re allowed to have more than one super account across different funds.
6. Employer details. Finally, inform your employer of your new super fund details where they can send your employer superannuation guarantee contributions.

Before making any major decision like this, it’s always a good idea to get financial advice from a licensed financial adviser.

If you're seeking a straightforward, low-fee option with unique benefits and solid returns, it might be worth looking into an industry fund. Just be sure to research thoroughly and seek financial advice before deciding.

* Past performance is not a reliable indicator of future performance.